SUEK: downgrades, index expulsion, coupon payments?

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SUEK's bond coupon payment faces several challenges. Downgraded by Moody’s to Caa2, expulsed from the JPM CEMBI index, and its (former) owner is under sanctions. Moody’s downgraded thermal coal miner SUEK along with 94 other Russian corporates to Caa2. SUEK’s prior rating was Ba2.

It was also announced that Andrey Melnichenko, who previously owned 92.2% of the company’s share capital, resigned from the board. Mr. Melnichenko was put on sanctions list by the EU on 10 March. The company claims that “the share [now] controlled beneficially by Mr. Melnichenko is 0%.”

The possibility of SUEK being added to a sanctions list is likely a topic of conversation among its investors, and in particular its bond holders. SUEK placed its debut Eurobond in September of last year, raising USD500mn with a global investor base.

The SUEK bond is soon supposed to pay its first coupon making it an interesting time for bond holders. Gazprom and Rosneft have reportedly been repaying bonds maturing in recent days, however, with some question marks whether instructions to pay were sent prior to the imposition of sanctions versus some Russian financial interests.